However, for most taxpayers the key concept in determining their tax status is not their domicile (which is a complex concept, based on ‘where they belong’) but their country of residence. Typically, this is decided by ‘physical presence’ tests, based on the number of days in a tax year that a person is in the country.
HM Revenue and Customs recently won a significant case which allowed them to adopt a stricter definition of the time someone is in the UK than they had previously applied (and than the definition used in their own guidance on residence).
More recently still, the stricter interpretation has been confirmed by the courts in a case involving a music agent, who has, as a result, been assessed to tax on nearly £3m which he received when out of the country. He argued that he was not resident in the UK for tax purposes when the payment was made, but the courts concluded otherwise as he had not shown he had made a ‘distinct break’ from the UK. In this case, his continued involvement with his UK company was also significant.
With the growing internationalisation of life and business, the authorities are increasingly taking a tough stance on any ‘grey areas’ involving residence and domicile where significant tax is at stake.